BASF’s Bock rules out shale gas imports to Europe

25 February 2014 12:32[Source: ICIS news]

By Tom Brown

LUDWIGSHAFEN, Germany (ICIS)--BASF has ruled out the possibility of importing shale gas from the US for use in its European petrochemicals operations, claiming that cheap ethane imports from the US do not fit plans for its European operations, the Germany-based producer’s chief executive said on Tuesday.

Addressing reporters at its Ludwigshafen headquarters, BASF CEO Kurt Bock said that its current product slate in Europe relied on heavier naphtha feedstocks, and there are no plans to alter this.

“There are no plans to import LNG [liquefied natural gas] from other parts to bring it into our chemicals operations in Europe. There is a simple reason for that, our crackers in Europe are predominantly naphtha-based,” he said.

The company has converted the cracker at its Port Arthur, US, site from naphtha to crack lighter feedstocks ethane and butane and is building a 10th furnace at the site to increase flexibility. These moves at the site, which is 60%-owned by BASF and 40%-owned by Total, were carried out to capitalise on cheap US ethane stocks as a result of the shale gas boom.

However, a similar conversion process is not on the cards for any of the company heavy feedstock crackers in Europe, according to Bock.

“In the US we essentially rewired our naphtha cracker away from heavy feedstock to lighter feedstock natural gas, [but] this is not what we envision for our European operations,” he said.

Switzerland-based INEOS is taking steps to increase ethane-processing capacities at its Rafnes, Norway and Grangemouth, UK crackers in anticipation of imports of shale ethane from the US, and Italy’s Versalis and Austria’s Borealis are also understood to be mulling ethane import deals.

INEOS has claimed that potential US ethane imports to Grangemouth could lower petrochemicals production costs to half the European average, and that imports to Rafnes could reduce ethyelene production costs at the site to around $500/tonne.

However, Bock stated that the cost of bringing material to Europe made it impossible to replicate the level of cost-reduction seen in the US since the start of the shale boom.

“If you import LNG [liquefied natural gas] to Europe, you have something like $5 import price per MBTU [million British thermal units]. Then comes transportation costs, which are also $5-6, so landing costs in Europe are not what they are in the US. You cannot just replicate what you have seen in the US,” he said.

Bock also renewed calls for the German government to allow further investigation into the feasibility of hydraulic fracturing for shale gas in the country, acknowledging that shale gas would not revolutionise the country’s energy make-up but could help to mitigate price increases.

Citing estimates that estimated shale gas reserves in the country could be sufficient to cover its natural gas requirements for 10 years, Bock criticised the “highly emotional” nature of the debate in Germany and called for further investigation into the viability of fracking for gas under controlled conditions.

“Our only demand is that [the government] allow us to try [extraction] out under lab conditions... when results are in can we ask ourselves if it is worthwhile,” he said.

Bock, who wrote in German newspaper Frankfurter Allgemeine Zeitung earlier this month that BASF expects to reduce its investments in Germany because of high energy costs, also called for reform of the country’s renewable energy policy framework.

“The government understands that we need reform when it comes to the Renewable Energy Act. The costs are not acceptable. People understand that Germany needs a competitive industry in future, and in many industries energy is crucial,” Bock said.

“[The issue is] not just about industries that need a lot of energy but [also] industry clusters,” he added.